Technical paper
Valuation of options on discretely sampled variance: a general analytic approximation
In this paper the authors provide a comprehensive treatment of the discretization effect under general stochastic volatility dynamics.
Portfolio insurance with adaptive protection
This paper investigates the optimal design of funds which provide capital protection at a specific maturity.
Research on equity release mortgage risk diversification with financial innovation: reinsurance usage
This paper examines the risk diversification of ERMs via the reinsurance strategy.
Two sides of the same coin: risk measures in the energy markets
This paper investigates whether there are existing common model features that yield consistently superior results under both VaR and ES risk metrics in the energy commodities markets.
Stochastic receding horizon control for short-term risk management in foreign exchange
The authors of this paper formalize a methodology to manage short-term FX risk.
Faster comparison of stopping times by nested conditional Monte Carlo
The authors propose a novel method for efficiently comparing the performance of different stopping times.
Evaluating the performance of the skewed distributions to forecast value-at-risk in the global financial crisis
This paper models the tail behavior of daily returns and forecasting VaR in order to evaluate the performance of several skewed and symmetric distributions.
The UK carbon floor and power plant hedging
How to calculate expected future carbon costs and optimal valuation and hedging decisions, by adjusting Monte Carlo simulations for the UK market
Extreme value theory for heavy tails in electricity prices
This paper looks at hourly spot prices at the German electricity market and applies extreme value theory (EVT) to investigate the tails of the price change distribution.
Loan classification under IFRS 9
Vivien Brunel proposes a method to classify non-defaulted loans in accordance with IFRS 9
The double default value-of-the-firm model
This paper analyses whether the double default treatment under Basel II is appropriate to capture the asymmetric relationship between an obligor and its guarantor.
Expected shortfall and VAR: cracking the marginal allocations
A new method to estimate marginal VAR and marginal ES is presented
Optimal trading with alpha predictors
This paper studies the problem of optimal trading using general alpha predictors with linear costs and temporary impact.
Operational risk: impact assessment of the revised standardized approach on Indian banks
This paper focuses on a comparison of the capital for Indian banks as required by the current regime for capital charge calculation, versus the possible revised Standardised Approach.
Capital and funding
Quants propose KVA and FVA accounting framework based on Solvency II regulation
Probabilistic forecasting of medium-term electricity demand: a comparison of time series models
This paper focuses on medium-term probabilistic forecasting for risk management purposes.
The challenges of derivatives central counterparty interoperability arrangements
This paper stuides a relevant policy question: does interoperability of cash equity CCPs also imply that it is beneficial to introduce interoperability for derivative CCPs?
Reconciling factor optimization with portfolio constraints
This paper projects an optimal unconstrained factor portfolio onto a set of all feasible portfolios using tracking error as a distance measure.
Pricing options on trend-stationary currencies: applications to the Chinese yuan
This paper derives a closed-form version of a model with a trend-stationary, stochastic volatility exchange rate, using both a linear and quadratic trend.
Wavelet decomposition and applied portfolio management
In order to separate short-term noise from long-term trends, this paper decomposes financial return series into their time and frequency domains.
Fitting a distribution to value-at-risk and expected shortfall, with an application to covered bonds
This paper suggests simple and intuitive models for covered bonds that allow quantitative assessment of expected loss and the impact of asset encumbrance.
Operational loss with correlated frequency and severity: an analytical approach
To enable autocorrelation in the frequency distribution, this paper proposes a significant generalization of the LDA model that involves treating operational risk as a Lévy jump-diffusion.
A network-based method for visual identification of systemic risks
This paper introduces the topic of network visualization to the journal by proposing the use of a combination of data reduction techniques and overlays that allow detection of large-scale patterns and outlier activity.
Credit risk spillover between financials and sovereigns in the euro area, 2007–15
This paper proposes a method based on Granger causality to measure the level of contagion between financial institutions and sovereigns.